North Korea's banks study reform

The eight-strong team from North Korea's central bank has arrived in the Chinese capital on a three-month study tour, the Financial Times reported.

In the last two months, famine-hit North Korea has embarked on a process of reforms designed to introduce market-style incentives into its planned economy.

The bankers' mission is the latest sign that communist North Korea may be considering fundamental reforms.

Rail links

News of the bankers' study trip has emerged as North Korea is sitting down to talk to South Korea about economic co-operation for the first time in two years.

The two sides are holding discussions about re-opening rail and road links, severed since the end of the Korean War in 1953.

China's central bank - not known for its openness - has denied that it is hosting a visit from officials of the secretive North Korean regime, the Financial Times reported.

However, the paper quoted an executive of one of China's top four commercial banks who has met the Korean team as saying they are "very keen to learn".

The Chinese banker added: "But it feels strange for us as we are students of financial reform too. The student has become the teacher."

Pupil turns teacher

His comments touch on fundamental problems with the Chinese banking system.

China's banks are struggling to move from being cash offices for state enterprises to commercially-driven firms that disperse credit on grounds of ability to pay.

Many foreign observers believe Chinese banks are technically bankrupt under the weight of past bad loans.

The North Korean team is thought to be visiting China's top four commercial banks - the Bank of China, the Industrial and Commercial Bank of China, Agricultural Bank of China and China Construction Bank.

They have reportedly asked how many customers a bank would need, highlighting the fact that North Korea's banking system is at a rudimentary stage.